THIRD DIVISION

[G.R. No. 135377. October 7, 2003.]

DSR-SENATOR LINES AND C.F. SHARP AND COMPANY, INC. ,

petitioners, vs . FEDERAL PHOENIX ASSURANCE CO., INC. , respondent.

DECISION

SANDOVAL-GUTIERREZ , J : p

Before us is a petition for review on certiorari 1 assailing the Decision 2 dated June 5, 1998
of the Court of Appeals in CA-G.R. CV No. 50833 which affirmed the Decision of the
Regional Trial Court (RTC), Manila City, Branch 16, in Civil Case No. 94-69699, "Federal
Phoenix Assurance Company, Inc. vs. DSR-Senator Lines and C.F. Sharp & Co., Inc.," for
damages arising from the loss of cargo while in transit.
Berde Plants, Inc. (Berde Plants) delivered 632 units of artificial trees to C.F. Sharp and
Company, Inc. (C.F. Sharp), the General Ship Agent of DSR-Senator Lines, a foreign shipping
corporation, for transportation and delivery to the consignee, Al-Mohr International Group,
in Riyadh, Saudi Arabia. C.F. Sharp issued International Bill of Lading No. SENU MNL-26548
3 for the cargo with an invoice value of $34,579.60. Under the Bill of Lading, the port of
discharge for the cargo was at the Khor Fakkan port and the port of delivery was Riyadh,
Saudi Arabia, viaPort Dammam. The cargo was loaded in M/S "Arabian Senator."
Federal Phoenix Assurance Company, Inc. (Federal Phoenix Assurance) insured the cargo
against all risks in the amount of P941,429.61. 4
On June 7, 1993, M/S "Arabian Senator" left the Manila South Harbor for Saudi Arabia with
the cargo on board. When the vessel arrived in Khor Fakkan Port, the cargo was reloaded
on board DSR-Senator Lines' feeder vessel, M/V "Kapitan Sakharov," bound for Port
Dammam, Saudi Arabia. However, while in transit, the vessel and all its cargo caught fire.
On July 5, 1993, DSR-Senator Lines informed Berde Plants that M/V "Kapitan Sakharov"
with its cargo was gutted by fire and sank on or about July 4, 1993. On December 16,
1993, C.F. Sharp issued a certification to that effect.
Consequently, Federal Phoenix Assurance paid Berde Plants P941,429.61 corresponding
to the amount of insurance for the cargo. In turn Berde Plants executed in its favor a
"Subrogation Receipt" 5 dated January 17, 1994.
On February 8, 1994, Federal Phoenix Assurance sent a letter to C.F. Sharp demanding
payment of P941,429.61 on the basis of the Subrogation Receipt. C.F. Sharp denied any
liability on the ground that such liability was extinguished when the vessel carrying the
cargo was gutted by fire.
Thus, on March 11, 1994, Federal Phoenix Assurance filed with the RTC, Branch 16, Manila
a complaint for damages against DSR-Senator Lines and C.F. Sharp, praying that the latter
be ordered to pay actual damages of P941,429.61, compensatory damages of
P100,000.00 and costs.
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 On August 22, 1995, the RTC rendered a Decision in favor of Federal Phoenix Assurance,
the dispositive portion of which reads:
"WHEREFORE, premises considered, judgment is hereby rendered in favor of
plaintiff and against the defendants who are hereby ordered jointly and severally
to pay plaintiff: TCAHES

I. The amount of P941,439.61 (should be P941,429.61 6 ) with legal

interest of 6% per annum from the date of the letter of demand of
February 8, 1993 (EXH. L) and 12% per annum from the date the
judgment becomes final and executory until its satisfaction (Eastern
Shipping Lines vs. Court of Appeals, G.R. No. 97412, July 12, 1994);
II. The amount of P15,000.00 by way of reasonable attorney's fees;
and

III. To pay costs.

"The counterclaim of defendants is DISMISSED.

"SO ORDERED." 7

On appeal, the Court of Appeals rendered a Decision dated June 5, 1998, affirming the RTC
Decision, thus:
"In the present recourse, the appellant carrier was presumed to have acted
negligently for the fire that gutted the feeder vessel and the consequent loss or
destruction of the cargo. Hence, the appellant carrier is liable for appellee's claim
under the New Civil Code of the Philippines.
"Contrary to C.F. Sharp and Co., Inc.'s pose, its liability as ship agent continued
and remained until the cargo was delivered to the consignee. The status of the
appellant as ship agent subsisted and its liability as a ship agent was co-
terminous with and subsisted as long as the cargo was not delivered to the
consignee under the terms of the Bill of Lading.

"IN LIGHT OF ALL THE FOREGOING, the appeal of the appellants is DISMISSED.
The Decision appealed from is affirmed. With costs against the appellants.

"SO ORDERED." 8

On September 7, 1998, the Court of Appeals denied the motion for reconsideration of DSR-
Senator Lines and C.F. Sharp, prompting them to file with this Court the instant petition.
We find the petition bereft of merit.
Article 1734 of the Civil Code provides:
"Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes
only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;
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 (5) Order or act of competent public authority."

Fire is not one of those enumerated under the above provision which exempts a carrier
from liability for loss or destruction of the cargo.
In Eastern Shipping Lines, Inc. vs. Intermediate Appellate Court, 9 we ruled that since the
peril of fire is not comprehended within the exceptions in Article 1734, then the common
carrier shall be presumed to have been at fault or to have acted negligently, unless it
proves that it has observed the extraordinary diligence required by low.
Even if fire were to be considered a natural disaster within the purview of Article 1734, it is
required under Article 1739 1 0 of the same Code that the natural disaster must have been
the proximate and only cause of the loss, and that the carrier has exercised due diligence
to prevent or minimize the loss before, during or after the occurrence of the disaster.
We have held that a common carrier's duty to observe the requisite diligence in the
shipment of goods lasts from the time the articles are surrendered to or unconditionally
placed in the possession of, and received by, the carrier for transportation until delivered
to or until the lapse of a reasonable time for their acceptance by the person entitled to
receive them. When the goods shipped either are lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and there
need not be an express finding of negligence to hold it liable. 1 1 aTcIEH

Common carriers are obliged to observe extraordinary diligence in the vigilance over the
goods transported by them. Accordingly, they are presumed to have been at fault or to
have acted negligently if the goods are lost, destroyed or deteriorated. There are very few
instances when the presumption of negligence does not attach and these instances are
enumerated in Article 1739. In those cases where the presumption is applied, the common
carrier must prove that it exercised extraordinary diligence in order to overcome the
presumption. 1 2
Respondent Federal Phoenix Assurance raised the presumption of negligence against
petitioners. However, they failed to overcome it by sufficient proof of extraordinary
diligence.
WHEREFORE, the instant petition is DENIED. The assailed Decision of the Court of Appeals
dated June 5, 1998, in CA-G.R. CV No. 50833 is hereby AFFIRMED.
SO ORDERED.
Puno, Panganiban and Carpio Morales, JJ ., concur.
Corona, J ., is on leave.
Footnotes

1. Pursuant to Rule 45 of the 1997 Rules of Civil Procedure, as amended.

2. Penned by now Supreme Court Justice Romeo J. Callejo, Sr., with Justices Marina L.
Buzon and Mariano M. Umali (retired) concurring.

3. Folder of Exhibits at 11.

4. Id. at 1.
5. Id. at 16.

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 6. Id. at 15-16.
7. Rollo at 60.
8. Id. at 47.
9. G.R. Nos. L-69044 and L-71478, May 29, 1987, 150 SCRA 463, 470-472.

10. "Art. 1739. In order that the common carrier may be exempted from responsibility,
the natural disaster must have been the proximate and only cause of the loss. However,
the common carrier must exercise due diligence to prevent or minimize loss before,
during and after the occurrence of flood, storm, or other natural disaster in order that the
common carrier may be exempted from liability for the loss, destruction, or deterioration
of the goods. The same duty is incumbent upon the common carrier in case of an act of
the public enemy referred to in Article 1734, No. 2."

11. Eastern Shipping Lines, Inc. vs. Court of Appeals, G.R. No. 97412, July 12, 1994, 234
SCRA 78, 85, citing Ganzon vs. Court of Appeals, G.R. No. L-48757, May 30, 1988, 161
SCRA 646, Kui Bai vs. Dollar Steamship Lines, 52 Phil. 863, Philippine National Railways
vs. Court of Appeals, G.R. No. L-55347, October 4, 1985, 139 SCRA 87 and Metro Port
Service, Inc. vs. Court of Appeals, G.R. No. L-57582, August 24, 1984, 131 SCRA 365.
12. Bascos vs. Court Of Appeals, G.R. No. 101089, April 7, 1993, 221 SCRA 318, 325.

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